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Market Dateline PP 7767/09/2010(025354) RHB Research Institute

RHB Equity 360°
27 April 2010 (Genting Singapore, Cement, Furniture, Allianz, Top Glove, EPIC; Technical: Measat) Top Story : Genting Singapore – The competition starts now Outperform Visit Note - The Casino Regulatory Authority issued a casino licence to Marina Bay Sands (MBS) yesterday, 26 Apr. Nevertheless, recall RWS needed a few days to reset the systems back to zero and to get the real “chips” ready before it could officially open, and the casino only opened a full 8 days after the licence was awarded. If we assume a similar scenario, MBS may only open in a few days time. - We believe MBS would likely face similar teething issues and would also take some time to ramp up the hotel rooms and gaming tables to full capacity. As such, while we do expect to see some shift in visitors to MBS, we believe the effect could be short term. In addition, we expect MBS’ opening to actually enlarge, rather than shrink, the gaming market, as more visitors would likely come through Singapore once both casinos are open, as the “pull factor” would be greater. - Seven takeaways from recent RWS visit: 1) >60% of tables operating currently; 2) no significant drop in visitor numbers since CNY; 3) table drops in line with expectations, mass table limits raised; 4) still waiting for junket approvals; 5) hotels still fully occupied; 6) Universal Studios Singapore tickets doubled up already; and 7) pre-operating losses to be lower qoq in 1QFY10. - Post-visit, we have tweaked our FY10-12 forecasts slightly, by +0.4-0.8%. No change to our S$1.35 fair value, based on blended average of EV/EBITDA (12x FY11 based on regional average) and DCF methodologies. At current price levels, GS’ FY11 EV/EBITDA of 11.8x is now at a 6.3% discount to FY11 regional peers average of 12.6x and 20% discount to Macau peers average. As such, while we expect some potential downside in share price upon opening of MBS, we believe downside risk is limited at these levels and advise investors to take this opportunity to buy the shares on weakness. Maintain Outperform.

Sector Call Building Materials : Higher cement prices effective 1 May 10 Overweight Sector Update Lafarge M Cement : Fair value raised to RM7.81 Outperform YTL Cement : Fair value raised to RM5.51 Outperform - Various sources have confirmed that cement prices will increase effective 1 May 10 to reflect escalating energy prices. - Taking the cue from the higher cement prices that more than offset higher energy prices, we view the latest development as an indication that pricing power of domestic cement producers are improving. - We also believe that higher cement prices are unlikely to result in an influx in cement imports, as: 1) Domestic cement is still competitively priced relative to the neighbouring countries; and 2) Cement production costs in neighbouring countries are trending up as well. - We are also holding our view that cement producers are likely to declare higher dividends in the near term. - We are raising our FY10-11 net profit forecasts for both Lafarge and YTL Cement by 8.4-13.1% and 7-19% respectively, to reflect higher selling prices that more than offset higher energy costs. Correspondingly, indicative fair values for Lafarge and YTL Cement are raised by 8.3-8.7%. - Maintain Overweight on the cement sub-sector. Top pick is Lafarge. Manufacturing : Highlights from Timber & Furniture Day Neutral Sector Update - We hosted a Timber and Furniture day last week, which we invited two furniture companies, which are Latitude Tree Holdings and Jaycorp. - Latitude has plans to become a Original Design Manufacturer (“ODM”), as margins would be higher and targets to achieve a product mix of 10% ODM: 90% OEM (from 5% ODM: 95% OEM currently) in two years time, by engaging US-based design consultants to come out with new product innovation. The company is also keen to expand its presence in developing countries and non-traditional markets like China and Vietnam, given the high population of those two countries. In China, the company is currently looking for strategic partners in order to acquire factories in strategic locations. This would enable Latitude to create a



stronger presence in China, which is the biggest furniture producer in Asia currently. The management estimated that capex would be approximately US$7-8m to be spread over the next two years in order to upgrade and expand its production facilities. Jaycorp recently introduced bedroom sets into their furniture range to fully leverage on the strengths of Digital Furniture Sdn Bhd (60%-owned), which they acquired in 2006. Currently the company is the key producer of parts and components of bedroom sets for Muar-based furniture players. Jaycorp has also made a strategic shift in its client focus, reducing the dependence on mega retailers such as Wal-Mart and Target due to its high level of “chargebacks”. This “chargebacks” relates to level of returns from Wal-Mart or Target, which Jaycorp would need to provide refunds. For FY11, the company plans to spend another RM7m for: 1) construction of new building with additional wood-working line at Yeo Aik Hevea; 2) additional warehouse facilities at Yeo Aik Wood; and 3) maintenance capex. We value both Jaycorp and Latitude based on 7x FY10 EPS, which is at 40% discount to our manufacturing sector PER of 12x FY10. This suggests a fair value of RM1.10 for Jaycorp and RM3.85 for Latitude respectively.

Corporate Highlights Allianz : Proposed rights issue of ICPS Outperform News Update - Allianz yesterday proposed a renounceable rights issue of new irredeemable convertible preference shares (ICPS), targeting to raise gross proceeds of RM611m, and pay a preferential dividend rate of 1.2x the declared dividend for Allianz shares in the same year. We - We believe the capital raising is partly to address the impact of FRS139 on the RM490m interest-free loan from parent Allianz SE. FRS139 will require a notional interest to be charged to the P&L, which we have assumed to be 5% p.a. in our forecasts from FY10. The ICPS will thus replace Allianz SE’s loan. - We estimate there would be 50% dilution to our FY11 EPS, assuming the ICPS are converted on a 1-for-1 basis at current share price. However, we note that this would be on a worst case basis, as 75% of the ICPS would be owned by Allianz SE. - We continue to like the stock given that we believe it is relatively undervalued due to its ability to maintain above-industry premium growth but below-industry combined ratio. We thus maintain our Outperform call on the stock. SOP fair value is unchanged at RM6.68. Top Glove : Proposes 1-for-1 bonus issue Outperform News Update - Top Glove yesterday declared a 1-for-1 bonus issue. Assuming all existing 6.6m treasury shares are resold in the open market (maximum scenario), up to 348.0m bonus issue will be issued, bringing Top Glove’s total issue share capital to 696.0m upon completion. - Although the bonus issue would not have any impact on valuations, it may help improve the stock’s liquidity and could help buoy retail sentiment towards the stock. - No change to forecasts for now. We maintain our fair value of RM15.50 and reiterate our Outperform call. EPIC : No surprises Outperform 1QFY10 Results - Results were in line with our expectations. Although core net profit accounted for only 21.5% of our full-year forecast, the 1Q is seasonally a weak quarter for the core business under Kemaman Supply Base (KSB) with offshore activity slowing down during monsoon season. Overall 1QFY12/10 operating margin increased 6.1%-pts qoq to 30.4% mainly due to lower operating expenses as well as higher contribution from Kemaman Port East Wharf and liquid chemical berth. - No change to forecasts for now. However, we highlight that there could be upside to our FY11-12 earnings driven mainly by stronger contribution from KSB stemming from the stronger pick-up in O&G activities. - At current levels, the stock is attractively priced for exposure to Terengganu’s offshore brownfield oil and gas activity. We thus maintain our Outperform call and fair value of RM2.69/share.

Technical Highlights

Daily Trading Strategy : The sustainability of this recovery remains questionable… - Technically, yesterday’s recovery with a positive candle and upbeat short-term momentum readings has reinforced the view of a potential technical rebound ahead. - If the buying support continues the index will be poised to revisit the recent high of 1,347.61 soon. - But due to the prevailing slow turnover of late, the sustainability of this recovery leg remains questionable. - Therefore, without a convincing breakout of 1,347.61 and a strong increment of daily turnover to 1.0-1.2bn shares mark, we are maintaining our cautious view on the local market direction. - Further resistance is seen at 1,390, but the immediate supports are at the 10-day and 40-day SMAs near 1,335 and 1,320. - Moreover, with a 2-day US FOMC meeting and the pending Senate vote on the US financial reforms this week, most investors are likely to stay sideways, pending more clues on the near-term market direction, in our view. Daily Technical Watch: Measat Global – The stock is poised to stage further run-down in the near term… - 10-day SMA: RM3.082 - 40-day SMA: RM2.816 - Support: IS = RM2.40 S1 = RM2.15 S2 = RM1.76 - Resistance: IR = RM3.00 R1 = RM3.72

Important Dates
Company New entitlements RHB Capital K&N Kenanga Tan Chong Motor Apex Healthcare Dutch Lady Milk Industries APM Automotive Ni Hsin Resources Yi-Lai AV Ventures Corp Going “ex” on 28 Apr Gamuda Wong Engineering Corp NSTP OSK Property Holdings OSK Holdings EPIC Grand Central Enterprises Hai-O Enterprise Entitlement details Final dividend of 17.45 sen less 25% tax First and final dividend of 1 sen less 25% tax Final dividend of 6 sen less tax Final gross div of 4.5 sen + special gross div of 10 sen, less 25% tax Final gross div of 10 sen less tax + tax exempt div of 5 sen Final dividend of 10 sen less 25% tax Final dividend of 0.67 sen less 25% tax First and final tax exempt dividend of 6 sen Final dividend of 2 sen less 25% tax Ex-date 20-May-10 24-May-10 25-May-10 31-May-20 1-Jun-10 4-Jun-10 4-Jun-10 7-Jun-10 11-Jun-10 Payment date 18-Jun-10 10-Jun-10 18-Jun-10 23-Jun-10 1-Jul-10 22-Jun-10 30-Jun-10 8-Jul-10 22-Jun-10

Renounceable rights issue of warrants 1st and final tax exempt dividend of 1 sen Final dividend of 5 sen per share less 25% tax Final dividend of 2.5 sen less 25% tax Final dividend of 5 sen less 25% tax Second interim dividend of 2.5 sen less 25% tax First and final dividend of 3 sen less 25% tax Second interim dividend of 4 sen less 25% tax

28-Apr-10 28-Apr-10 28-Apr-10 28-Apr-10 28-Apr-10 28-Apr-10 28-Apr-10 28-Apr-10

10-May-10 14-May-10 18-May-10 18-May-10 18-May-10 19-May-10 20-May-10

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